Correlation Between Coca Cola and Dimensional Sustainability

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Dimensional Sustainability at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Coca Cola and Dimensional Sustainability into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Coca Cola and Dimensional Sustainability Core, you can compare the effects of market volatilities on Coca Cola and Dimensional Sustainability and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Coca Cola with a short position of Dimensional Sustainability. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Dimensional Sustainability.

Diversification Opportunities for Coca Cola and Dimensional Sustainability

-0.77

Correlation Coefficient

Coca Cola  Dimensional Sustainability

Pay attention - limited upside

The 3 months correlation between Coca and Dimensional is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Dimensional Sustainability Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Sustainability and Coca Cola is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Coca Cola are associated (or correlated) with Dimensional Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Sustainability has no effect on the direction of Coca Cola i.e., Coca Cola and Dimensional Sustainability go up and down completely randomly.

Pair Corralation between Coca Cola and Dimensional Sustainability

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Dimensional Sustainability. In addition to that, Coca Cola is 1.07 times more volatile than Dimensional Sustainability Core. It trades about -0.21 of its total potential returns per unit of risk. Dimensional Sustainability Core is currently generating about 0.22 per unit of volatility. If you would invest  3,560  in Dimensional Sustainability Core on September 4, 2024 and sell it today you would earn a total of  396.00  from holding Dimensional Sustainability Core or generate 11.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

The Coca Cola  vs.  Dimensional Sustainability Cor

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Dimensional Sustainability

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Sustainability Core are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Dimensional Sustainability may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coca Cola and Dimensional Sustainability

The main advantage of trading using opposite Coca Cola and Dimensional Sustainability positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Dimensional Sustainability can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dimensional Sustainability will offset losses from the drop in Dimensional Sustainability's long position.

The idea behind The Coca Cola and Dimensional Sustainability Core pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.